Cash

In addition to publishing The FinTech Blog, I lead Partnerships and Business Development at MaxMyInterest, an award-winning FinTech firm that provides a way for high net-worth individuals and their advisors to earn dramatically more on cash.

We offer a service called MAX that combines a multi-bank solution with higher yield than brick-and-mortar banks, brokerage accounts or money market funds – with broader FDIC insurance protection, and features to optimize your cash.

I’ve seen first-hand the huge role that cash plays in the multi-trillion dollar wealth management business from working in online banking and wealth management. Max is smart for clients with substantial cash – and a great product for financial advisors, who have lacked any form of compelling solution for clients seeking a better return on cash.

After the one-time setup, Max continuously monitors interest rates to make sure you’re always earning a competitive yield. It operates much like how family offices manage cash for ultra high net worth families, but is available to a broader demographic.

Max helps you manage a portfolio of online bank accounts, linked to your own existing checking/brokerage account so you don’t need to visit multiple websites to both see and manage a combined balance across multiple banks.

With Max, funds are “waterfalled” across your accounts, so cash is always earning the highest rates.

Since Max is not a bank – and never takes custody of your funds – your money is always kept safe in your own bank accounts, held in your own name, to which you have direct access at all times.

As part of the service, Max includes a “rate following” feature, whereby if a bank were to either raise or lower its rates, your funds automatically move to the higher payer bank, while keeping you under the FDIC insurance limit.

Another benefit is the automatic cash sweep. To help prevent inadvertent build up of cash in accounts paying very little interest, Max includes an automatic cash sweep that sends cash above a target account balance to higher-interest accounts (and topping up your checking account, if your account falls below a threshold you set).

Some banks and brokerage firms offer a sweep, but sweep from one account to another at the same financial institution, and often to money market funds that don’t pay much.

Higher Yields with Lower Risk

How is Max able to deliver yield that is 10x greater than most bank accounts, and 50-100x greater than most brokerage accounts? By leveraging the costs savings associated with online banking. Yet the risk is actually lower, since the funds are FDIC insured and often spread across multiple banks vs. concentrated at a single institution.

The yield benefit is substantial, and Max provides reporting tools to see how well you’re doing including what you’re earning versus what you might have earned at your bank.

Max also has Consolidated Tax Reporting, so you don’t need to worry about looking for your 1099-INT statements, despite having multiple banks.

Max includes time-saving features such as Intelligent Fund Transfers, so you can specify an amount to move out of your Max account, without having to know which bank: Max is smart. It draws from your lowest earning bank account first, and does the reverse as any funds are deposited, filling up to the FDIC limit.

Do you need a multi-bank account?

For those with little cash, Max offers features that may not make sense for its fees. Max is a smart answer for advisors to give to their clients with substantial cash. Some advisors, especially those who are not fiduciaries (or don’t focus on client’s best interest) may be tempted to leave clients in money market funds or not ask about held away cash.

Whether held away or in the brokerage account, the research shows that HNWI’s in the U.S. prefer to hold cash at significant levels, since cash drag is less of a concern given their overall financial picture, or a preference for cash as ‘dry powder’, hedging or for other reasons, such as capital calls.

Max members are typically business owners, doctors or dentists, technologists, lawyers, startup founders or early employees, investment bankers, engineers and others with significant cash. While Max is open to everyone and there is no minimum balance requirement, Max members tend to hold between $50,000 and $5,000,000 in cash.

The individual FDIC insurance limit is $250,000, so Max helps people obtain broader FDIC insurance coverage by opening accounts at multiple banks and spreading funds across these accounts. Max also supports individual, joint as well as revocable trust accounts.

Max is “set it and forget it” service that makes money for you while you sleep.

Helping Advisors in a Low Yield World

One reason I joined Max was its focus on financial advisors. Many FinTech startups focus on competing for eyeballs in highly fragmented markets by giving away B2C services for free and then finding other ways to ‘monetize’ their customers, or chase business in the crowded marketplace lending or alternative lending category.

In wealth management, it’s not always about cost, and investors value their privacy and don’t want to be ‘monetized.’ I also think advisors play a key and growing role for clients with substantial investments.

Since Max is capable of delivering an extra 0.90% of yield on cash, that’s equivalent to helping investors earn an extra 0.21% across their entire portfolios.

We’re glad to bring Max to forward-thinking advisors looking for creative solutions for their clients. Many clients are looking for smarter ways to get a better yield on their cash, and Max is a compelling solution that can boost a client’s returns on all their holdings – inclusive of cash – while enabling an advisor to provide more holistic advice.

The Future

Max is now compatible with accounts at 15 of the nation’s largest banks and brokerage firms, integrates with advisor CRM systems and, soon, portfolio accounting systems.

In the future, investors will insist on making the most of their cash in the bank. According to the RBC/Capgemini World Wealth Report, high net worth households currently keep 23.7% of their holdings in cash.

Advisors who already use Max to help their clients earn higher yield are doing their clients a great service. It won’t be long before all advisors realize that cash, the most-often-overlooked asset class, is worthy of greater attention.

Max is a new and exiting player plus an emerging aspirational brand within the upper end of financial services landscape, and offers a glimpse of future of financial services as a multi-bank world.

While only growing by word-of-mouth and referrals from advisors, individuals can sign up for Max by speaking to their advisor or via Max website at MaxMyInterest.com.